Gas rule changes could stimulate economy

Clearer exceptions to the state’s onshore gas export ban, and finalised fracking rules, will help WA attract continued investment, the petroleum industry had said in a parliamentary inquiry submission.

The Australian Petroleum Production and Exploration Association wrote the submission for state parliament’s Economics and Industry Standing Committee inquiry into intergenerational challenges and opportunities for the economy, Business News can reveal.

The government announced the onshore gas export ban in August last year, while simultaneously making an exemption for the Waitsia project to export through a swap deal with the North West Shelf Venture.

The Waitsia project is owned by Japan’s Mitsui & Co and Beach Energy, which boasts Kerry Stokes’ Seven Group Holdings as top shareholder.

Last week, a state government funded report into downstream gas opportunities called for clearer rules around exemptions to the ban, adding that the existing arrangement would dissuade investment and lead to lower long term domestic gas supply.

In its submission, APPEA said the ban was viewed negatively by potential investors in upstream oil and gas.

“The aim of this policy change was to increase supplies of gas to the WA domestic market, but APPEA was concerned that it would in fact decrease the likelihood of investment in potential new developments and therefore would decrease domestic supply,” APPEA said. 

“ACIL Allen’s Western Australian Gas and Downstream Opportunities Study found that allowing a portion of future gas developments to be exported could facilitate new developments and new sources of supply to the domestic market. 

“This is because by allowing some access to the higher-priced export market, the improved project economics would essentially “bankroll” the rest of the development for domestic gas production.”

The state’s natural gas reserves could aid in decarbonisation, support growth of renewables, and generate economic activity.

Global gas demand was expected to double by 2041, APPEA said.

LNG exports earnings are forecast to increase from an estimated $33 billion in 2020–21 to $49 billion in 2021–22, the lobby group said.

Stimulation

The state government also needed to make a decision on rules around hydraulic fracture stimulation, used in unconventional drilling for tight and shale gas, APPEA said.

The government received a report from a scientific inquiry into fracture stimulation in WA in September 2018.

But the recommendations still have not been implemented, APPEA said.

“The HFS Inquiry handed down its report three years ago in September, finding that with strong regulation HFS activities are of low risk to people and the environment,” APPEA WA director Claire Wilkinson said. 

“The government committed to implementing all recommendations from the Inquiry but some of the most critical regulatory changes, such as the industry code of practice, are still outstanding.

“This has had material impacts on exploration programs where HFS is required, with companies delaying their work programs whilst awaiting details of the regulations under which their activities will be assessed. 

“These delays are costing the economy and costing jobs and reduce the attractiveness of WA as a place to invest when capital can easily find opportunities in other countries where costs are cheaper. 

 “A recent report by ACIL Allen stated that new gas supplies could support new developments in WA such as ammonia, urea, and methanol production, fueling economic activity to the tune of up to $10 billion in Gross State Product.”